INDIA
28 March 2014
New Evidence on Indian Employment: Light at the End of the Tunnel?
S.K. Sasikumar & Rakkee Thimothy fromV.V. Giri National Labour Institute in India have shared with us this piece on employment in India.
The National Sample Survey Office (NSSO) of India has just released the initial results of the 68th Round of the Employment and Unemployment Survey (2011-12). The survey, based on a large sample, brings some good news to the Indian economy crippled with low income growth and a volatile macroeconomic scenario.
This survey was undertaken by the NSSO in an atmosphere of skepticism regarding the veracity of the 66th Round (2009-10) results, particularly the dismal employment growth noted during 2004-05 to 2009-10. While several analysts argued that the country’s economic growth had indeed failed to generate adequate employment, policy circles largely refused to accept the results, citing problems with data collection.
The recent NSSO round is likely to bring some cheer to policy-makers as initial results indicate some positive trends on the employment front—a huge respite as several policy documents highlight the centrality of employment for tackling economic slowdown and as a means to achieve the national agenda of inclusive growth.
As per latest data, the total workforce in the country increased by 13.9 million from 459 million to 472.9 million during 2009-10 to 2011-12, while the increase in employment during 2004-05 to 2009-10 was merely 1.1 million. This is an impressive achievement considering that economic growth had in fact slowed down during this period. But what is more striking are the emerging patterns of employment generation— urban areas dominate in employment growth in India, with rural areas remaining almost stagnant.
This is not surprising considering the structural transformation of the Indian labour market has been intensifying in recent years. The 68th Round data indicates that for the first time the share of the primary sector in total employment has dipped below the halfway mark (49 per cent), while the shares of the secondary and service sectors have witnessed noteworthy increases.
This is an impressive performance considering that in 1999-2000, the share of primary sector in total employment generation used to be 60 per cent. As per the latest round of the NSSO significant employment growth seems to be occurring in service related activities (27 per cent) and construction (11 per cent).
Within the secondary sector, the share of manufacturing employment (stagnant for more than two decades) has witnessed a much needed increase, from 11 per cent in 2009-10 to 12.6 per cent in 2012. This is significant given that the National Manufacturing Policy 2011 has set a target of creating 100 million jobs within a decade.
Considering the high share of micro, small and medium enterprises (MSMEs) in India’s manufacturing employment, it is important to forefront MSMEs as a catalyst for generating productive employment by providing a business environment conducive for their growth—through channelising formal and easy credit to enterprises, and extending design and market support through the innovative use of information technology.
Another significant trend in the labour market is the increasing share of regular/salaried workers, who now constitute 18 per cent of total employment. Though a detailed analysis is required to assess the sub sectoral composition of the regular workforce, available evidence indicates that a significant proportion of the new entrants are absorbed in low-end economic activities.
Such a situation highlights the need to extend effective social protection measures for such workers. Self-employment continues to dominate, with a 52 per cent share in total employment; crucially, an overwhelming majority of the self-employed is engaged in low-income earning activities. While views differ on whether there is any scope for improving productivity of those in low-end self-employment, recent global evidences show that training interventions among groups in low-end self-employment can substantially improve foundational skills like financial literacy and basic management skills and thus enhance their productivity.
Unemployment rates in India continue to hover around a low of 2 per cent, though the number of unemployed people increased from 9.8 million to 10.8 million during 2009-10 to 2011-12. It is important to note that underemployment rather than open unemployment is the main hurdle for developing countries like India. Strategies to improve productivity in farming, relocation of labour from rural to urban areas and expansion of rural non-farm employment are thus significant.
One of the most intense debates regarding the 66th NSSO round was the decline noted in the labour force participation rates (LFPR) of women. During 2004-05 to 2009-10, number of women workers dropped by 21.3 million, of which 19.5 million were in rural areas. Explanations provided range from increasing educational enrollment, improvement in earnings of male workers that discourages women’s economic participation, and lack of employment opportunities at certain levels of skills and qualifications discouraging educated women to seek work.
Evidence from the 68th Round NSSO data indicates no reversal in the female LFPR— which is estimated to be 22.5 per cent—a further slump from the 23.3 per cent reported in 2009-10. Other unfavourable indicators relating to women’s employment are: a high proportion of women in agriculture (63 per cent, as against 44 per cent of males); low share of women in regular employment (13 per cent, as against 20 per cent of males); and significant share of urban women in service sector are engaged as domestic workers. Such trends highlight the paramount need to promote the participation of women on the one hand and eliminate the barriers in accessing quality and remunerative jobs on the other.
Well-orchestrated public policy responses can generate quality employment, but it is equally vital to ensure that employment is used as a tool for social and economic inclusion. These are momentous discussions considering that India is expected to reap the benefits of the demographic ‘bulge’ around the age group of 15–34 years. Equipping the youth with relevant skills and providing them opportunities for quality employment are critical not only from the perspective of their well-being but also for ensuring social cohesion.
While the government has come up with several skill development initiatives, particularly for the youth, it is also imperative to establish strong linkages between education, skill development and the world of work.
This survey was undertaken by the NSSO in an atmosphere of skepticism regarding the veracity of the 66th Round (2009-10) results, particularly the dismal employment growth noted during 2004-05 to 2009-10. While several analysts argued that the country’s economic growth had indeed failed to generate adequate employment, policy circles largely refused to accept the results, citing problems with data collection.
The recent NSSO round is likely to bring some cheer to policy-makers as initial results indicate some positive trends on the employment front—a huge respite as several policy documents highlight the centrality of employment for tackling economic slowdown and as a means to achieve the national agenda of inclusive growth.
As per latest data, the total workforce in the country increased by 13.9 million from 459 million to 472.9 million during 2009-10 to 2011-12, while the increase in employment during 2004-05 to 2009-10 was merely 1.1 million. This is an impressive achievement considering that economic growth had in fact slowed down during this period. But what is more striking are the emerging patterns of employment generation— urban areas dominate in employment growth in India, with rural areas remaining almost stagnant.
This is not surprising considering the structural transformation of the Indian labour market has been intensifying in recent years. The 68th Round data indicates that for the first time the share of the primary sector in total employment has dipped below the halfway mark (49 per cent), while the shares of the secondary and service sectors have witnessed noteworthy increases.
This is an impressive performance considering that in 1999-2000, the share of primary sector in total employment generation used to be 60 per cent. As per the latest round of the NSSO significant employment growth seems to be occurring in service related activities (27 per cent) and construction (11 per cent).
Within the secondary sector, the share of manufacturing employment (stagnant for more than two decades) has witnessed a much needed increase, from 11 per cent in 2009-10 to 12.6 per cent in 2012. This is significant given that the National Manufacturing Policy 2011 has set a target of creating 100 million jobs within a decade.
Considering the high share of micro, small and medium enterprises (MSMEs) in India’s manufacturing employment, it is important to forefront MSMEs as a catalyst for generating productive employment by providing a business environment conducive for their growth—through channelising formal and easy credit to enterprises, and extending design and market support through the innovative use of information technology.
Another significant trend in the labour market is the increasing share of regular/salaried workers, who now constitute 18 per cent of total employment. Though a detailed analysis is required to assess the sub sectoral composition of the regular workforce, available evidence indicates that a significant proportion of the new entrants are absorbed in low-end economic activities.
Such a situation highlights the need to extend effective social protection measures for such workers. Self-employment continues to dominate, with a 52 per cent share in total employment; crucially, an overwhelming majority of the self-employed is engaged in low-income earning activities. While views differ on whether there is any scope for improving productivity of those in low-end self-employment, recent global evidences show that training interventions among groups in low-end self-employment can substantially improve foundational skills like financial literacy and basic management skills and thus enhance their productivity.
Unemployment rates in India continue to hover around a low of 2 per cent, though the number of unemployed people increased from 9.8 million to 10.8 million during 2009-10 to 2011-12. It is important to note that underemployment rather than open unemployment is the main hurdle for developing countries like India. Strategies to improve productivity in farming, relocation of labour from rural to urban areas and expansion of rural non-farm employment are thus significant.
One of the most intense debates regarding the 66th NSSO round was the decline noted in the labour force participation rates (LFPR) of women. During 2004-05 to 2009-10, number of women workers dropped by 21.3 million, of which 19.5 million were in rural areas. Explanations provided range from increasing educational enrollment, improvement in earnings of male workers that discourages women’s economic participation, and lack of employment opportunities at certain levels of skills and qualifications discouraging educated women to seek work.
Evidence from the 68th Round NSSO data indicates no reversal in the female LFPR— which is estimated to be 22.5 per cent—a further slump from the 23.3 per cent reported in 2009-10. Other unfavourable indicators relating to women’s employment are: a high proportion of women in agriculture (63 per cent, as against 44 per cent of males); low share of women in regular employment (13 per cent, as against 20 per cent of males); and significant share of urban women in service sector are engaged as domestic workers. Such trends highlight the paramount need to promote the participation of women on the one hand and eliminate the barriers in accessing quality and remunerative jobs on the other.
Well-orchestrated public policy responses can generate quality employment, but it is equally vital to ensure that employment is used as a tool for social and economic inclusion. These are momentous discussions considering that India is expected to reap the benefits of the demographic ‘bulge’ around the age group of 15–34 years. Equipping the youth with relevant skills and providing them opportunities for quality employment are critical not only from the perspective of their well-being but also for ensuring social cohesion.
While the government has come up with several skill development initiatives, particularly for the youth, it is also imperative to establish strong linkages between education, skill development and the world of work.